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The student is shown two radio choices: \"Yes\" and \"No\". One of them is correct.

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"templateType": "anything", "description": ""}, "interest3": {"name": "interest3", "group": "Ungrouped variables", "definition": "random(3..6#1)", "templateType": "randrange", "description": ""}, "i2d": {"name": "i2d", "group": "Ungrouped variables", "definition": "((sqrt(1+({netReturn}/100)))-1)2", "templateType": "anything", "description": ""}, "interest1": {"name": "interest1", "group": "Ungrouped variables", "definition": "{interest}-2", "templateType": "anything", "description": ""}, "price5": {"name": "price5", "group": "Ungrouped variables", "definition": "((1-{tax6}/100)5((1-{vnet}^{nyearL})/({netRed}/100))+70{vnet}^{nyearL})/(1-({tax6}/100){vnet}^{nyearL})", "templateType": "anything", "description": ""}, "interest": {"name": "interest", "group": "Ungrouped variables", "definition": "random(7..9#1)", "templateType": "randrange", "description": ""}, "tax1": {"name": "tax1", "group": "Ungrouped variables", "definition": "random(47..42#1)", "templateType": "randrange", "description": ""}, "tax5": {"name": "tax5", "group": "Ungrouped variables", "definition": "{tax4}+15", "templateType": "anything", "description": ""}, "price3": {"name": "price3", "group": "Ungrouped variables", "definition": "((1-{tax4}/100){interest3}{a2L}+60(1/(1+{netReturn}/100))^{Lyears})/(1-0.4(1/(1+{netReturn}/100))^{Lyears})", "templateType": "anything", "description": ""}, "nyearL": {"name": "nyearL", "group": "Ungrouped variables", "definition": "20-{nyear}", "templateType": "anything", "description": ""}, "vnet": {"name": "vnet", "group": "Ungrouped variables", "definition": "1/(1+{netRed}/100)", "templateType": "anything", "description": ""}, "i2": {"name": "i2", "group": "Ungrouped variables", "definition": "(sqrt(1+({interest}/100))-1)*2", "templateType": "anything", "description": ""}, "tax": {"name": "tax", "group": "Ungrouped variables", "definition": "random(23..27#1)", "templateType": "randrange", "description": ""}, "a2L": {"name": "a2L", "group": "Ungrouped 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"(0.75){interest3}{a215}+100(1/1.05)^15", "templateType": "anything", "description": ""}, "a210": {"name": "a210", "group": "Ungrouped variables", "definition": "(1-(1/(1+{interest}/100)^10))/{i2}", "templateType": "anything", "description": ""}, "a215": {"name": "a215", "group": "Ungrouped variables", "definition": "((1-(1/(1+5/100))^15)/{i2c})", "templateType": "anything", "description": ""}}, "advice": "

$P=DNa_{\\bar{n}| i}^{(p)}+RNv_{i}^{n}$

\n

$\\frac{C(t)}{R(t)}=\\frac{Q(t)}{Q(b)}$

\n

$i^{(p)}\\geq (1-t_1)\\frac{D}{R}$ => Capital Gains Exist

\n

$P=(1-t_1)DNa_{\\bar{n}| i}^{(p)}+RNv_{i}^{n}$

\n

$P=(1-t_1)DNa_{\\bar{n}| i}^{(p)}+RNv_{i}^{n}-t_2(RN-P)v_{i}^{n}$

\n

", "statement": "

Reminder: To check whether CGT is applicable.

", "parts": [{"showFeedbackIcon": true, "variableReplacements": [], "type": "gapfill", "scripts": {}, "prompt": "

Ten million pounds nominal of loan stock was issued on 1 January 2006. The stock is due to be redeemed in one payment of 110% nominal on 1 January 2016. The stock pays interest at 10% per annum, payable half-yearly in arrears on 1 June and 1 January.

\n

a) An investory, subject to income tax at {tax}% but no liable to capital gains tax, bought £10,000 nominal of the stock at issue so as to obtain a net effective yield of {interest}% per annum, after tax. What price did the investor pay per £100 nominal on the date of issue?  £[[0]]

\n

b) On 1 January 2014, the first inventor, having received the interest due on that date, sold the stock to a second investor who was subject to {tax1}% tax on both income and capital gains. The price paid by the second investor was calculated so as to earn him a net effective yield of {interest1}% per annum, after tax. What price did the second investor pay per £100 nominal? £[[1]]

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\n

Investor A purchased a bond with exactly 15 years to redemption. The bond is redeemable at par and has a gross redemption yield of 5% per annum effective. It pays coupons of {interest3}% per annum, half-yearly in arrears. He pays tax at 25% on the coupons only.

\n

a)Calculate the price paid by the investor A for the bond.  £[[0]].

\n

b)After exactly {years} years, immediately after the payment of the coupon then due, investor A sells this bond to investor B who pays income tax at a rate of {tax4}% and capital gains tax at a rate of {tax5}}%. The bond is purchased by investor B to provide a net return of {netReturn}% per annum effective. Calculate the price paid by investor B. £[[1]].

\n

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An investor purchased a bond with exactly 20 years to redemption. The bond, redeemable at par, has a gross redemption yielf of 6%. It pays annual coupons, in arrears, of 5%. The investor does not pay tax.

\n

a)Calculate the purchase price paid for the bond.  £[[0]]

\n

b)After exactly {nyear} years, immediately after payment of the coupon that due, this investor sells the bond to another investor. That investor pays income and capital gains tax at a rate of {tax6}%. The bond is purchased by the second investor to provide a net rate of return of  {netRed}% per annum.

\n

     I) Is CGT applicable?

\n

       [[2]]

\n

     II) Calculate the price paid by the second investor.  £[[1]]

\n

\n

   

\n

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